The Effect of Longevity on Estate Planning
As a result of many positive developments in the field of medical sciences we now live longer. However, this new reality is frequently overlooked when drafting wills, creating trusts, setting up private foundation, and other aspects of planning the family estate.
With wealth owners living longer, one issue that has increasingly come to the fore is if it is reasonable for the beneficiaries of a will, etc. to receive their share of the family patrimony themselves late in life? For example, if the patriarch of a family passed away at 90 years of age, the children likely would be in their 60s or 70s when receiving their inheritance; some of them even could have predeceased the patriarch! Some people are now questioning if there should be greater consideration given to distributing at least some of the patrimony to the next generation while they are younger.
The reality that people are increasingly living longer may be related to the increased incidence of various forms of dementia. Once a patriarch or matriarch begins to show symptoms of dementia, family members and beneficiaries need to involve themselves in making sure all succession information and procedures are in place, that all assets are accounted for, etc. The patriarch or matriarch of a family going into the slow decline of dementia is one issue; sudden, unexpected death is quite another! As we all know, anyone can die at any time and there is never an inappropriate time to deal with succession.
The term “estate planning” is gradually evolving. In the past, we used to plan for and decide who will get what part of the family assets under what circumstances and condition when someone passed away. Nowadays, we need to include in the plan who will be the financial caretaker or the person who will take over the control over our assets at a time when we are no longer able to do so.
In addition, we tend to marry and form our families later in life and also plan our career path to span well after the age of 60 years old. It is not uncommon for college-age children to be put in the position of have to manage the personal, financial, and medical affairs of parents who are well into their 80s, or to see 70-year-old children caring for 100-year-old parents.
Another social development, which complicates the issues of succession, is a relatively steady divorce rate of about 50% in many developed countries. It is not uncommon to see parents in need of care, living apart near or far, or or even in a different country, with middle-aged adult children raising their own young second or third families at a time when their own parents need of them the most.
This 21st Century culture and medical science is creating a new set of challenges which demand the greater need for one to organize one’s affairs in order for the family members, or at least the future financial caretaker, to know what you have, where it is, how to get to it, for what or for whom it is designated, and who best to contact to handle your affairs.
As the result of these developments, we see the emergence of a new type of financial professional, the financial caregiver, an individual or company who helps the elderly with the management of money and other assets.
The roles which are typically assigned to financial caretakers are:
1. Help with the day-to-day finances and planning of future needs.
2. Help identify the benefits available to the elderly, which could range from large issues (e.g., taxes) to small (e.g., reduced transportation fares).
3. Help avoid preventable problems such as missed bill payments, lapsed insurance premiums, etc.
4. Help reduce the risk of fraudulent transactions or identity theft, and act on behalf of the client when it occurs.
5. To have someone with knowledge of the financial affairs to take over when needed.
Due to advances in medical science, people are increasingly outliving their mental and physical capacity to care for themselves and their assets. Financial planning is advancing as well, in scope, purpose, and technological sophistication. Estate planning’s biggest challenge used to be about what happens when we die but is now more about what happens as we live longer and longer.